Criticism Unfounded!

The art trade (galleries, auction houses, art dealers) perceives the resale right as a financial burden. In countries such as Germany with a longstanding awareness of the resale right, pragmatic solutions have been developed, which have contributed to its broad acceptance.

The arguments against the resale right are the same around the world.

Argument 1: The art trade is migrating to countries without the resale right.

This argument is constantly advanced against the resale right by the art trade.

A number of studies have examined the impact of introducing the resale right on local art markets. The most recent such effort was an EU Commission report released in December of 2011. However, none of these efforts have managed to establish a migration trend. The reason is that the resale right represents only one of many cost factors and is a minor one at that. More weight is placed on the general tax system in the country of transaction, and local VAT taxes play an especially important role. General VAT rates vary between 15 and 25 per cent in the EU alone.

However, the art trade is not motivated strictly by financial considerations. It is much more important to dealers to have a location where they can cross paths with the best-resourced buyers. Certain locations often crystallise as markets for certain types of artwork, and these are the places where one can find the best expertise, the largest selection, and highest level of trust.

Argument 2: The administrative burden outweighs the benefit.

The administrative burden on artists is minimal. Collecting societies monitor the market, handle resale right claims, and forward royalties to artists. The best condition for collective management of the resale right is a legal requirement for claims to be administered by collecting societies. Under this arrangement, payments can be made to the appropriate societies for all sales subject to the resale right, and the societies also bear responsibility for passing on royalties to non-members.

Nonetheless, the market has also developed simple information and accounting systems where there is no requirement to work through collecting societies. The Resale Right Artist Search on the VG Bild-Kunst website makes it easy to find information regarding the artists, for whom the collecting society handles claims.

Galleries that work directly with artists do not have to pay resale royalties as a general rule, as they typically handle first sales settled with the artists themselves. Galleries are, however, required to make contributions to the German Artist Social Fund for payments made to artists.

Argument 3: Living artists benefit the least from the resale right.

It is true that the works of younger artists are resold less often than those of older, better-known or deceased artists. However, such criticism misses the mark, insofar as it is desired that heirs of artists should receive royalties as do the heirs of pianists and book authors when the works of their parents or grandparents are used.

Moreover, the number of living artists who benefit from the resale right is highly dependent on the threshold value, at which it takes effect. This threshold is relatively low in Germany (400 Euros resale price), which is the reason why approximately one half of the royalties distributed by VG Bild-Kunst go to living artists and half go to heirs.

Argument 4: Increase in value, not the purchase price, is the real key factor for resale right royalties.

This claim is understandable in theory, as the resale right is meant to allow artists to participate in the increase in value of their works. However, such an approach would be nearly impossible to implement in practice in light of the fact that verifying increases in value would be dependent on purchase price disclosure. The art trade massively opposed such disclosure when the resale right was introduced. If the resale right were linked to actual increase in value, the percentage would have to be much higher and the outcome would still be the same.

In the British art market, for instance, claims are made about the existence of a so-called "cascade effect," but there is no evidence to support this assertion. If this "cascade effect" is understood to mean that each new sale of an item should trigger royalties when it is resold multiple times in short succession, this is the logical impact of the resale right on each sales transaction as envisioned by legislators.

On the other hand, if it is based on the concept that buyers and sellers reach agreements on royalties that are not entirely consistent with the law (e.g. the seller is to pay the resale right royalty), then the market will impede such an effect.